No tax on amount received from employer for COVID treatment

As per a recent amendment to the IT Act, the compensation received from an employer by an employee for treatment of COVID may not be considered as income


As per the amendment of Section 56 of the Income Tax Act, via the Finance Bill, 2022, any amount received by an employee from his employer towards COVID-related treatment will not be considered as income. And therefore, it will not be subject to income tax.

The Union budget 2022 provides for no income tax on financial assistance received from an employer for treatment of COVID-19, with effect from 2019. The amount needs to be related to medical treatment only. The Bill clarifies that any monetary assistance received against the total expense a person has incurred for COVID-19 treatment shall not be considered as an income, and therefore not be subject to income tax.

As per another amendment, the amount given to the family of a deceased employee as compensation, within a year of the employee’s death due to COVID, will not be considered income either.

A statement by the Finance Ministry from June 2021 announced that income-tax would not be applicable on the sum received by an employee from an employer or from any friend or relative for treatment of COVID-19 during FY 2019-20 and subsequent years. It further stated that as a relief to the family members of such taxpayers, income-tax exemption shall be provided to the ex-gratia sum received by family members of an employee from the employer on the former’s death due to COVID-19 in 2019-20 and subsequent years. This exemption was allowed without any cap to the sum received from the employer, but there was a limit of Rs 10 lakh to the assistance received from people other than the employer.

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